Anne and Matt, October 2013 Net Worth

In the series Naked With Cash, seven Consumerism Commentary readers share their financial progress on a monthly basis. They are joined by Certified Financial Planners who provide feedback on their journey. Read this introduction to learn more about the series.

Anne and Matt are twenty-seven years old, living in the Midwest, with two children. Read their bio here for background about their financial situation. Anne and Matt are on Team Neal, with Certified Financial Planner Neal Frankle. Review their September update for last month’s progress.

Their goals are to strike a balance between putting aside money for the future and enjoying the present and to save enough for retirement. Keep reading to see their net worth report, comments about the report and their progress, and thoughts from Neal Frankle. Following Neal’s thoughts, budgeting expert Jacob Wade from iHeartBudgets offers commentary.

Anne’s comments and analysis

Matt’s October pay includes a quarterly bonus, and our total income for the month was $15,126 (or $9,110 take-home).

In October, Matt’s Simple IRA went into effect and we’re loading that up with $2,000 per paycheck for the rest of the year to max it out. It’s reducing Matt’s taxes by quite a bit in the pay stubs, so that’s been nice.

I’m including the Simple IRA line item in the 401(k) rather than starting a new line on here.

I didn’t realize until recently that there’s a limit to how much is withheld for Social Security taxes. Matt has passed the threshold this year, so no more money is being withheld from his paychecks for that.

Money flowing out of our checking account for the month: $10,856, which is everything from bills, spending and investment contributions.

So uh, this is more than our take-home. A chunk of it was catch-up contributions to our church since we had missed a few Sundays in September and October. We give 10% gross. The next big item was finishing off one of our Roth IRAs. We have the money to finish the second IRA set aside in savings and we’ll finish that off probably in November.

Other one-time expenses included our property tax bill (we save up for it every month in our savings account) and some medical bills.

We have money earmarked to go toward our November and December expenses. With the four remaining paychecks for the year, a portion of that will go to our church and charity, some of it will be set aside for January’s expenses, and the rest will go toward saving for a replacement vehicle someday.

That goal was something we had at the beginning of the year, but then household projects and funding the Simple IRA put that on the back burner.

Overall, I think it was a good month. I like looking at the take-home and outflow and I wish I did that with previous months. It helps tell the story of the month better than just the changes in net worth since we can see more of what we’re working with.

I’m hoping to hit $200,000 in net worth by the end of the year. If the stock market doesn’t crap out and we don’t have anything unexpected, I think we can hit it.

Feedback from Neal Frankle, CFP

Thanks for the comprehensive report. Nice work shoveling money into the Simple IRA. As you point out, it does reduce your tax burden. And more importantly, over time it will make a big difference when its time to tap into that retirement account when you need income.

The outflow (exceeding $10,000) is important to watch but nothing to stress over. This is why this program is 12 months long and not just 30 days. What’s important is your average monthly spending rather than what happens in any particular month.

Also, you are demonstrating a great deal of responsibility by remembering to finish off those Roth IRAs. Bravo. I also love that you are mindful of putting money aside to replace a vehicle before you need the money. Very few people actually do this. I’m really impressed.

I think you touched on a very important point with respect to your net worth. Most of your net worth is going to bounce around as a result of things beyond your control –- the stock market and real estate market. I look at the net worth once a year –- maybe. What is more important, and you demonstrate that you understand this, is to keep a very watchful on eye on those things you can control like your spending and investing.

Nice job.

Feedback from Jacob Wade

Great work on socking away so much cash for retirement. With the tax advantages and long term growth potential of your portfolio, you two will be set in only a few decades! Well done. Have you thought about retirement in terms of “how much is enough?” or “when should Matt retire from his traditional job?” Given that you are on track to have more than enough (in my opinion) before traditional retirement age, have you thought about an exit strategy?

There are just some things I have been mulling over and your family is in a great position to start considering them as well. Either way, well done, and keep rocking!

Feedback from Luke Landes

October was a great month for you, Anne! You and Matt are showing what might be your best net worth increase for the year, and the month provided a nice income boost in the form of Matt’s quarterly bonus. You’re making solid decisions with your retirement, and I like the questions that Jacob is asking.

I’d also suggest spending some time starting now to think about your goals for next year.

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It does seem like Matt should be able to retire early, and that’s definitely something he (and I!) would love.

Our plan right now is to max out those retirement accounts (2 IRAs and the SIMPLE), bulk up cash savings a bit more, and then look into taxable investments to earmark for retirement.

While Matt makes a lot of money right now (I consider it a lot anyway), we know that it doesn’t necessarily mean he’ll always be at that level. The business may dry up, he may end up with lower pay for better work/life…who knows.

So we just want to make the most of this income and not squander it, ya know?

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